The Black Management Forum (BMF) is competing with the ANC Youth League to represent those who wish to gouge economic advantage from transformation and bulldoze every law, institution, practice and idea that stands between them and the smorgasbord.

Listen to the BMF president Jimmy Manyi at a recent conference hosted by his organisation as he urges us into the Animal Farm:

Firstly he attacks the protection of property in the constitution, saying the clauses insisting on fair or market value for appropriated land are the “sting in the tail”;

He goes further and argues “It appears the Constitution does not support the transformation agenda in this country”;

He bemoans court cases where previously disadvantaged individuals lost their court bids when trying to obtain tenders;

He attacks media freedom, asking “Why is it that the media can have a field day railroading the office of the president without impunity?” … although he probably means “with impunity”.

The times live report on his input concludes that: “Two further issues he feels need reviewing were Section 27 of the Constitution which pronounces on procurement and culture”

Manyi and those he represents are delightfully undisguised. There is something strangely compelling about a politics where the class that wishes to loot the state and pillage what it can from the transformation agenda sticks out a belligerent jaw and sulkily asserts: “F$@% YOU, it’s my right!”

It is a legitimate question to ask: what are Julius Malema and Barbara Hogan (to name two arbitrary ANC leaders) doing at the same table? When you strip away all the noise and posturing you are left with the question: what, politically, economically, ethically, spiritually, culturally do they have in common? How can one organisation have so broad a policy that both these people can claim to find a home there?

Usually, my conclusion is that the original policies designed to transform us away from Apartheid are disappearing from the ruling alliance and being replaced by the objective of power (and wealth and influence) for its own sake.

This morning I want to temper that negative view.

Our society has a number of real and urgent contradictions or fault-lines where the clashing currents are difficult to manage. Here are some of the most important:

Urban, modern and fast versus rural, traditional and conservative – with a sub-theme of modern city women versus patriarchal men or at least men carrying around chauvinist and patriarchal ideas in their heads.

The fact of the matter is that these divisions are not represented in the clash of politics in our formal political processes of parliament and government. There is no one party on one side of any of these divisions and mostly no one party on the other.

A quick glance through the ANC’s top leadership, structures and relationships shows a very deliberate attempt to represent the full scope of South African society.

I have mentioned elsewhere how Jacob Zuma has played a crucial role in winning Zulu’s back into the ANC. Cyril Ramaphosa is in part there for Venda’s, Hogan for whites and women, Derek Hanekom for whites and farmers, Mac Maharaj for Indians; Trevor Manuel for Coloureds and business … and global capital markets; Baleka Mbete for women … the list really could go on for ever.

One of the reasons I think Julius Malema is unlikely to face serious punishment from the ANC leadership, is the organisation values the fact that, at one level of abstraction, he “speaks for” the 2.5 million young black South Africans between the ages of 18 and 25 who are unemployed and not in any kind of education. (I do think Malema is primarily a populist disguising his own greed, but his populism also articulates – or helps weave into the national debate – a real view and an actual constituency.)

Then the alliance relationships with Cosatu, with the SACP and broader relationships with Contralesa (Congress of Traditional Leaders of South Africa); the Black Management Forum and outwards all the way to polite meetings with the Afrikaaner Weerstandsbeweging are all concentric circles of the ANC attempting to straddle all divides in the Society.

I think there is a very real danger in this context of ANC politics and policy becoming meaningless and allowing people in it for personal riches and power to rise to the top.

But I think it is important to acknowlge the upside.

We are a society in which the formal insitutions of democracy are new and tentative – and the divisions are threatening and profound. As many groups and interests as possible need to find expression in the national political debate and the formal institutions do not yet represent them.

As a second prize, an overwhelmingly dominant ruling party that attempts to play the role of a parliament of all the people, that attempts to speak with the cacophony of the thousand arguing tongues is not all bad.

Why setting back Julius Malema is important

I mostly want to discuss why this is important – beyond the obvious reasons that drive the obsessive media focus on the grandiose little ANC Youth League President.

But first a bit of context:

As I write Julius Malema is in the process of being disciplined in the ANC. He has sailed closer and closer to the wind in the last few weeks and, it seems, a dunking is now inevitable.

There are three main charges:

On a Zanu PF platform in Zimbabwe last week he attacked the MDC and praised the Zimbabwe “land reform” programme and used the opportunity to promise economy wide nationalisation in South Africa – this a few days after President Jacob Zuma had returned from trying to broker an agreement between the MDC and Zanu PF;

He sung – in defiance of a court ruling and of specific orders from Jacob Zuma – the old “struggle” song that includes the words “kill the boer, kill the farmer” – this transgression became more serious when Eugene TerreBlanche was brutally murdered by young black workers on his farm;

Each of these incidents received specific sanction from the ANC, but the straw that broke the proverbial camel’s back came when Malema was (quite bombastically) giving an interview at ANC headquarters on his triumphal return from Zimbabwe. For a variety of reasons Malema seemed to lose his temper and, in a bullying and autocratic fashion, threw out a BBC journalist. Catch that unsettling episode here. For the ANC, where form remains important, this rudeness was a step too far.

Julius Malema and the policy he represents is on the back foot. His behaviour has finally caused those who have backed and protected him within the ANC (particularly Tokyo Sexwale) to start to put distance between themselves and the Youth League leader.

His relative isolation is reinforced by a growing rebellion against him within the ANC Youth League – which he appears to be only just managing to control through bullying and barnstorming tactics.

So why do we so minutely follow the two steps forward, one step backward advance and retreat of Julius Malema and his cronies?

For me – as a ‘professional political analyst’ (someone whose non-evidential claim is that his political views are subjected to more rigorous intellectual testing than those of your average Joe or Sipho in the comments pages of timeslive.co.za before their airing … hmmm) – there is a real and legitimate reason. The Malema grouping is fighting to control the African National Congress and, in my opinion, the African National Congress remains, for better or for worse, the institution most able to affect South Africa’s future.

South African politics is overwhelmingly dominated by the ANC and nothing indicates that we are in a process of moving away from this domination. Our politics is racialised and people tend to vote their ethnic identity. The ANC has a de facto monopoly on the banners and flags and songs and dead heroes of the liberation struggle; and it has unprecedented capacity to spread goodies around its supporters and potential supporters. This combination – being the party of liberation and being able dispense the national largesse – kept the Mexican Partido Revolucionario Institucional or PRI (the Institutional Revolutionary Party)in power for over 70 years (sometimes with a different name) and it is not inconceivable that the ANC could rule for as long or longer – especially given the additional dimension of racial solidarity.

So, the setback suffered by Julius Malema and his cronies is important because this is the most dangerous wing of the most voracious faction within the ANC. It is not for nothing that Malema has been singled out by the hysterical and monomaniacal mass media in South Africa. His skill at taking rents out of an economy trying to transform itself is by no means unique within this or previous versions of the ANC, but it is his astute use of racial appeals to the poorest black South Africans to cover, disguise and justify his tenderpreneurial flare that makes him formidable.

I do not think it is all over for Julius Malema. A person of this political skill and focus is not going to be wiped off the face of the political realm because of a setback like this one. I expect him to be disciplined by the ANC and I expect that this will set him back a few years.

It is, of course, important to point out that Julius Malema is just an extreme version of something that has taken hold of the ANC at a very deep level. I am under the impression that the first thing the Zuma faction did when it came to power after Polokwane was change tender boards throughout the country. Do you think that was to clean them up after Mbeki’s depredations? I think not.

So closing down Malema is a necessary, but by no means sufficient, condition for cleaning up the ruling party and government. That would entail handing over to the ten or so people in the SACP and Cosatu leadership who are not themselves armpits deep on the take – and, unfortunately, they would begin paving the road to hell almost immediately.

So is Juju, as he is not very affectionately known by the aforementioned media, gone?

He is 29 years old which will make him 36 at the ANC’s elective conference in 2017 and 41 at the elective conference in 2022. He has got a lot of time.

I can almost hear, echoing the words of Arnold Schwarzenegger’s 1994 The Terminator, the battered Julius Malema growling: “I’ll be back”.

I, for one, am not holding thumbs that the next manifestation is going to be any better. In fact a Julius Malema, older and wiser, tempered in the fires of adversity – goodness, now there is a scary thought.

Herewith a note I wrote a week ago for a South African client concerning a recent whip around the London fund management industry

Foreign fund managers perceptions of South African political risk

I recently had an opportunity to interact with a few London-based global emerging market fund managers. These were generally from long-only equity funds, but included a smattering of everything else.

The main lessons I learned were

not to be overwhelmed by the negative news flow;

always think in relative terms – a negative and obsessive focus on South Africa is meaningless without realistic peer comparisons.

This was brought home to me again as the weekend news of the brutal killing of Eugene Terre’Blanche hit the local and international press. The media focus alone seemed to suggest that this was a potentially destabilising event. However the story has quickly descended into the squalid domestic tale it really is, and the over-the-top alarmism should be faintly embarrassing to those who trumpeted it over the holiday weekend.

Here are the main questions I raised in London and the main responses I received*:

The news explosion around Jacob Zuma’s latest romantic and similar engagements does not drive capital flows

This point did not need emphasising with the fund managers I saw. If anything they were faintly puzzled as to why I would bother to raise it. For them the emerging market universe has much colourful (and sometimes ugly) personal behaviour by the political leadership and other powerful members of society. Zuma’s polygamy and latest love child are way down the list of “transgressions” in that universe.

Conflict over economic policy making the investment and operating environment difficult

The point I was making was that Pravin Gordhan’s budget speech differed in important ways from both the DTI’s Rob Davies’ Industrial Policy Action Plan II and Ebrahim Patel’s Two Year Strategic Plan. My issue with this was that Jacob Zuma had not settled important policy conflicts within his cabinet.

The different emphases could be summarised as follows:

Pravin Gordhan supported fiscal restraint, inflation targeting, a segmented labour market and a competitive and unprotected manufacturing sector – and for this he was heavily criticised by Cosatu.

The policies espoused in IPAP 2 and the Two Year Strategic Plan from the Department of Economic Development implicitly called for monetary easing, a weaker currency and a vigorous programme of interventions into the domestic economy through the use of tariffs and taxes – policies strongly supported by Cosatu.

Several of the fund managers that I interacted with had recently (within the last few months) met with all the ministers concerned either as part of a marketing tour led by Jacob Zuma or while in South Africa themselves. The detailed interactions with all these departments had convinced them that the policies of government were the policies as espoused by Pravin Gordhan and further that the more activist policies from Patel and Davies were not uncommon in emerging markets and at least did not include new capital controls.

I am not convinced the policy confusion is ‘investment neutral’ – although I do not think is catastrophic. Cosatu and the SACP clearly believe they have a chance to set policy – including monetary and industrial policy – through the DTI and the new Department of Economic Development. Thus Jacob Zuma seems to be clearer and more decisive about these issues in front of foreign fund managers than he ever is in front of a domestic audience. He will reap high resistance and anger from Cosatu and “the left” when they realise they have been lied to again. I think it is clear we are seeing the first signs of this realisation – in, for example, the threatened strikes during the World Cup against Eskom increases.

Julius Malema and the Nationalisation of the Mines

Julius Malema provokes a lot of reaction wherever he is discussed. Not many fund managers take him seriously and again it is because they have met and dealt with senior government and party officials who have spoken of Malema with patronising indulgence and a touch of exasperation.

Susan Shabangu, Minister of Mining, has done good work in assuring fund managers throughout the world that there is no possibility that the South African government will consider the nationalisation of mines as a serious policy option; and I came across several people who had met her and been convinced by her assurances.

Cronyism and tenderpreneurial flair – the threat to service delivery, stability, the functioning of the parastatals

Continuing on the theme of Jacob Zuma’s inability to solve the big conflicts in his government I argued that cronyism, nepotism and tender abuse are:

important contributing reasons for the poor functioning of the State Owned Enterprises – the Eskom example reveals that enrichment agendas in tendering and the appointment of senior personnel damages the utility’s ability to do the job;

key to understanding the failures of local government and hence the ongoing violence of the service delivery protests.

There were few fund managers I met who disagreed with this assessment, although some, yet again, argued that in the universe that includes Russia, the Middle East and Brazil, South Africa stands out less than we would imagine.

The World Cup and the waiting Hangover

It is perverse to argue that the downside of the World Cup includes:

it could become the focus terrorist attacks;

it could be targeted by organised labour and taxi operators to strengthen their hand against government or employers;

it will inevitably entail a let-down or ‘hangover” period.

This would be a little like arguing that the downside of life is death and that it should therefore be avoided.

I never met a fund manager in London, or elsewhere for that matter, who disagreed.

*Please note that this is a subjective process, over determined by my own interpretation and by a selection processes out of my control. Any real collation of “the views” of fund managers must theoretically translate into their holdings and the prices at which they buy and sell.

The bludgeoning to death of Eugène Terre’Blanche together with the Zimbabwe public display by Julius Malema feels like a tableau arranged by a naughty god with idle hands.

Here’s the shape of it:

Malema, on a Zanu-PF platform, admires the seizure of white owned farmland and sings “kill the boer” – catch his words here. This is on a Zanu-PF platform. That party spent much of the 1980’s ransacking the liberation pantry. Just as the last few goodies were being looted and eaten by the engorged Zanu-PF fat cats popular discontent started to escalate and began focusing itself on the ruling party. With no wealth left to buy off the masses, the Zanu-PF cronies turned to what was left of the productive economy: the commercial farming sector. The land was largely white owned. Zanu-PF orchestrated the forceful invasion and seizure of the farms and commercial agriculture and foreign earnings collapsed.

Terre’Blanche, who infamously, and almost on a whim, beat a black man into permanent brain damage, is an icon of white supremacy – much diminished now and something of a joke; but undoubtedly sanctified by the manner of his death (it appears he was killed by young black labourers over a dispute about money). Already there is noise of a white backlash – although it is too early to say whether this should be taken seriously or not.

I don’t really need to say anything more. This story tells itself and it has its own energy … except perhaps it should be mentioned that Jacob Zuma has just attempted to mediate between the MDC and Zanu-PF – the history of Zanu-PF’s violent attempts to crush the MDC refers. Julius Malema is the President of the ANC Youth League – and I suspect someone more important and threatening than he first appears, as I argue here. Jacob Zuma is the president of the ANC and of the country and the SADC negotiator between the MDC and Zanu-PF … and Julius Malema refused to see the MDC while he was in Zimbabwe.

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I am an independent political analyst focusing on Southern Africa and I specialise in examining political and policy risks for financial markets.

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